Dynamic Pricing In The Presence Of Strategic Consumer With Product And Intertemporal Substitution PDF Download
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| Author | : EunMi Lee |
| Publisher | : |
| Total Pages | : 57 |
| Release | : 2011 |
| Genre | : |
| ISBN | : |
Download Dynamic Pricing in the Presence of Strategic Consumer with Product and Intertemporal Substitution Book in PDF, ePub and Kindle
This study develops a dynamic pricing model with a quality substitutable product, taking into account strategic and myopic consumers. In each of the two periods, the firm can choose between offering a high quality product, a low quality product or both and the corresponding price for the product. Strategic consumers compare current utility with future utility in order to decide the time of purchase and the quality of the product in an attempt to maximize their utilities. Myopic consumers consider only current utility in purchasing of the products. We generate scenarios, prove whether a scenario is feasible and which scenario produces the best profit for the firm. Our result suggests that the firm obtains the best profit when it provides only high quality products in each of the two periods. In other words, the firm does not have to offer quality substitution as intertemporal substitution suffices to maximize the expected profit.
| Author | : Mirko Kremer |
| Publisher | : |
| Total Pages | : 39 |
| Release | : 2015 |
| Genre | : |
| ISBN | : |
Download Dynamic Pricing in the Presence of Strategic Consumers Book in PDF, ePub and Kindle
We investigate the impact of strategic consumer behavior on retailers' dynamic pricing decisions. We present a stylized two-period model, and test the equilibrium predictions in a set of behavioral experiments in which human subjects played the role of pricing managers. Our main insight is that relative to equilibrium predictions, subjects underprice in the main selling season. Consequently, they sell more inventory and obtain higher revenue in that season. However, by doing so they significantly limit their ability to generate revenue in the markdown season, which, in the presence of strategic consumers is a major source of revenue.
| Author | : Yinhan Meng |
| Publisher | : |
| Total Pages | : 96 |
| Release | : 2011 |
| Genre | : |
| ISBN | : |
Download Dynamic Pricing Under Demand Uncertainty in the Presence of Strategic Consumers Book in PDF, ePub and Kindle
We study the effect of strategic consumer behavior on pricing, inventory decisions, and inventory release policies of a monopoly retailer selling a single product over two periods facing uncertain demand. We consider the following three-stage two-period dynamic pricing game. In the first stage the retailer sets his inventory level and inventory release policy; in the second stage the retailer faces uncertain demand that consists of both myopic and strategic consumers. The former type of consumers purchase the good if their valuations exceed the posted price, while the latter type of consumers consider future realizations of prices, and hence their future surplus, before deciding when to purchase the good; in the third stage, the retailer releases its remaining inventory according to the release policy chosen in the first stage. Game theory is employed to model strategic decisions in this setting. Each of the strategies available to the players in this setting (the consumers and the retailer) are solved backward to yield the subgame perfect Nash equilibrium, which allows us to derive the equilibrium pricing policies. This work provides three primary contributions to the fields of dynamic pricing and revenue management. First, if, in the third stage, inventory is released to clear the market, then the presence of strategic consumers may be beneficial for the retailer. Second, we find the optimal inventory release strategy when retailers have capacity limitation. Lastly, we numerically demonstrate the retailer's optimal decisions of both inventory level and the inventory release strategy. We find that market clearance mechanism and intermediate supply strategy may emerge as the retailers optimal choice.
| Author | : Jafar Chaab |
| Publisher | : |
| Total Pages | : 0 |
| Release | : 2022 |
| Genre | : |
| ISBN | : |
Download Dynamic Pricing in the Presence of Social Externalities and Reference-price Effect Book in PDF, ePub and Kindle
| Author | : Xuanming Su |
| Publisher | : |
| Total Pages | : 0 |
| Release | : 2012 |
| Genre | : |
| ISBN | : |
Download Inter-Temporal Pricing with Strategic Customer Behavior Book in PDF, ePub and Kindle
This paper develops a model of dynamic pricing with endogenous inter-temporal demand. In the model, there is a monopolist who sells a finite inventory over a finite time horizon. The seller adjusts prices dynamically in order to maximize revenue. Customers arrive continually over the duration of the selling season. At each point in time, customers may purchase the product at current prices, remain in the market at a cost in order to purchase later, or exit, and they wish to maximize individual utility. The customer population is heterogeneous along two dimensions: they may have different valuations for the product and different degrees of patience (waiting costs). We demonstrate that heterogeneity in both valuation and patience is important because they jointly determine the structure of optimal pricing policies. In particular, when high-value customers are proportionately less patient, markdown pricing policies are effective because the high-value customers would buy early at high prices while the low-value customers are willing to wait (i.e. they are not lost). On the other hand, when the high-value customers are more patient than the low-value customers, prices should increase over time in order to discourage inefficient waiting. Contrary to intuition, we find that strategic waiting by customers may sometimes benefit the seller: when low-value customers wait, they compete for availability with high-value customers and thus increase their willingness to pay. Our results also shed light on how the composition of the customer population affects optimal revenue, consumer surplus, and social welfare. Finally, we consider the long run problem of selecting the optimal initial stocking quantity.
| Author | : Alex Gershkov |
| Publisher | : MIT Press |
| Total Pages | : 209 |
| Release | : 2024-06-11 |
| Genre | : Business & Economics |
| ISBN | : 0262552442 |
Download Dynamic Allocation and Pricing Book in PDF, ePub and Kindle
A new approach to dynamic allocation and pricing that blends dynamic paradigms from the operations research and management science literature with classical mechanism design methods. Dynamic allocation and pricing problems occur in numerous frameworks, including the pricing of seasonal goods in retail, the allocation of a fixed inventory in a given period of time, and the assignment of personnel to incoming tasks. Although most of these problems deal with issues treated in the mechanism design literature, the modern revenue management (RM) literature focuses instead on analyzing properties of restricted classes of allocation and pricing schemes. In this book, Alex Gershkov and Benny Moldovanu propose an approach to optimal allocations and prices based on the theory of mechanism design, adapted to dynamic settings. Drawing on their own recent work on the topic, the authors describe a modern theory of RM that blends the elegant dynamic models from the operations research (OR), management science, and computer science literatures with techniques from the classical mechanism design literature. Illustrating this blending of approaches, they start with well-known complete information, nonstrategic dynamic models that yield elegant explicit solutions. They then add strategic agents that are privately informed and then examine the consequences of these changes on the optimization problem of the designer. Their sequential modeling of both nonstrategic and strategic logic allows a clear picture of the delicate interplay between dynamic trade-offs and strategic incentives. Topics include the sequential assignment of heterogeneous objects, dynamic revenue optimization with heterogeneous objects, revenue maximization in the stochastic and dynamic knapsack model, the interaction between learning about demand and dynamic efficiency, and dynamic models with long-lived, strategic agents.
| Author | : Zheyi Li |
| Publisher | : |
| Total Pages | : 0 |
| Release | : 2022 |
| Genre | : |
| ISBN | : |
Download Cyclic Pricing with Strategic Waiting Customers and Population Dynamics Book in PDF, ePub and Kindle
We consider continuous-time dynamic pricing in the presence of strategic waiting customers and their population dynamics. The firm makes the pricing decision with a finite menu of prices each time. Customers arrive at a constant rate with heterogeneous valuations. Customers purchase if the current price is less than their corresponding valuations. The remaining customers are strategic: they may leave or wait for future clearance sales, and the leaving rate can be population-contingent. The firm has the option to offer a clearance price to attract all waiting customers to purchase. We build a continuous-time model by exploiting impulse control. For a two-price menu, the optimal pricing policy is a cyclic pricing strategy that starts with a regular price and ends at a clearance price. For a multi-price menu, in contrast to the existing literature, we show that the optimal dynamic pricing policy can be either a textit{pump and dump cyclic} or textit{generalized pump and dump cyclic} strategy. Which strategy is optimal is determined by the sign of the effective marginal leaving rate. We provide analytical solutions for the cycle length and the optimal pricing path. Our results provide new explanations for the popularity of periodic clearance sales with penetration pricing and skimming pricing in practice. Our findings also provide guidelines on carrying out dynamic pricing with the customer leaving behaviors. Numerically, we show that ignoring cyclic pricing in the presence of strategic waiting customers can lead to a significant profit loss.
| Author | : David Prakash |
| Publisher | : BoD – Books on Demand |
| Total Pages | : 155 |
| Release | : 2022-08-19 |
| Genre | : Business & Economics |
| ISBN | : 3756863514 |
Download Behavioral Consequences of Dynamic Pricing Book in PDF, ePub and Kindle
Digital technologies are driving the application of dynamic pricing. Today, this pricing strategy is used not only for perishable products such as flights or hotel rooms, but for almost any product or service category. With dynamic pricing, retailers frequently adjust their prices over time to respond to factors such as demand, their supply and that of competitors, or the time of sale. Additionally, dynamic pricing allows retailers to take advantage of a large share of consumers' willingness to pay while avoiding losses from unsold products. Ultimately, this can lead to an increase in revenue and profit. However, the application of dynamic pricing comes with great challenges. In addition to the technological implementation, companies have to take into account that dynamic pricing can cause complex and unintended behavioral consequences on the consumer side. The key objective of this dissertation is to provide a deeper understanding of the impact of dynamic pricing on consumer behavior. To this end, this dissertation presents insights from four perspectives. First, how reference prices as a critical component in purchase decisions are operationalized. Second, how customers search for products priced dynamically, differentiated by business and private customers, as well as by different devices used for the search. Third, whether and how dynamic pricing influences the impact of internal reference prices on purchase decisions. Finally, this dissertation demonstrates that consumers perceive price changes as personalized in different purchase contexts, leading to reduced perceptions of fairness and undesirable behavioral consequences.
| Author | : Omar Besbes |
| Publisher | : |
| Total Pages | : 33 |
| Release | : 2016 |
| Genre | : |
| ISBN | : |
Download Dynamic Pricing Strategies in the Presence of Demand Shifts Book in PDF, ePub and Kindle
Many factors introduce the prospect of changes in the demand environment that a firm faces, with the specifics of such changes not necessarily known in advance. If and when realized, such changes affect the delicate balance between demand and supply and thus current prices should account for these future possibilities. We study the dynamic pricing problem of a retailer facing the prospect of a change in the demand function during a finite selling season with no inventory replenishment opportunity. In particular, the time of the change and the postchange demand function are unknown upfront, and we focus on the fundamental trade-off between collecting revenues from current demand and doing so for postchange demand, with the capacity constraint introducing the main tension. We develop a formulation that allows for isolating the role of dynamic pricing in balancing inventory consumption throughout the horizon. We establish that, in many settings, optimal pricing policies follow a monotone path up to the change in demand. We show how one may compare upfront the attractiveness of pre- and postchange demand conditions and how such a comparison depends on the problem primitives. We further analyze the impact of the model inputs on the optimal policy and its structure, ranging from the impact of model parameter changes to the impact of different representations of uncertainty about future demand.
| Author | : Oben Ceryan |
| Publisher | : |
| Total Pages | : 40 |
| Release | : 2017 |
| Genre | : |
| ISBN | : |
Download Dynamic Pricing of Substitutable Products in the Presence of Capacity Flexibility Book in PDF, ePub and Kindle
Firms that offer multiple products are often susceptible to periods of inventory mismatches where one product may face shortages while the other has excess inventories. In this paper, we study a joint implementation of price- and capacity-based substitution mechanisms to alleviate the level of such inventory disparities. We consider a firm producing substitutable products via a capacity portfolio consisting of both product dedicated and flexible resources and characterize the structure of the optimal production and pricing decisions. We then explore how changes in various problem parameters affect the optimal policy structure. We show that the availability of a flexible resource helps maintain stable price differences across products over time even though the price of each product may fluctuate over time. This result has favorable ramifications from a marketing standpoint as it suggests that even when a firm applies a dynamic pricing strategy, it may still establish consistent price positioning among multiple products if it can employ a flexible replenishment resource. We provide numerical examples for the price stabilization effect and discuss extensions of our results to a more general multiple product setting.
